Practice Tests
What's the most common ratio for borrowers who use split, or piggyback, mortgages?
80/10/10
Consumers in the _______ range are well above the average credit score and generally have an easy time getting approved for new credit.
800+
How's interest defined as it's related to a mortgage loan payment?
A fee paid to lenders for the use of their money
Which of the following could be a concern for a lender regarding property condition?
A roof that's missing shingles
What type of property is Valerie appraising if she's using the sales comparison approach?
A single-family residence built six years ago
To which of the following borrowers might a lender be most likely to recommend an FHA loan?
A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores Loans insured by the Federal Housing Administration require a 3.5% down payment and permit buyers with lower credit scores to qualify for a loan.
What type of clause is this? "If any monthly installment under this Note is not paid when due and remains unpaid after a date specified by a notice to Mortgagor, the entire principal amount outstanding and accrued interest thereon shall at once become due and payable at the option of the Note holder."
Acceleration clause
Under the "Summaries of Transaction" section on page three of the Closing Disclosure, amounts listed for the borrower's transaction are calculated to result in ______
An amount due from the borrower, which will match the cash to close amount
What is a reverse exchange?
An investor finds and closes on an investment property and then decides to immediately sell another investment property.
Andrea's lender has notified her of its intent to foreclose. Her loan is secured with a deed of trust. What rights does she have to redeem her property?
Andrea can cure the default and reinstate the loan.
Which of the following is a likely effect when the discount window is closed?
Banks don't have access to additional funds.
What information does Schedule A of a title commitment provide?
Basic facts related to the transaction and property, including a legal description
To qualify as a Texas veteran, a person must ______.
Be at least 18 years old
Bill's loan is secured by a mortgage. Who holds legal title when this security instrument is used?
Bill
As part of a deficiency judgment sought by a lender, a ______ may be placed on any current and future property the borrower owns until the lender recovers all losses.
Blanket lien
Chapo's property was foreclosed on and he is facing a deficiency judgment so the lender can recover losses incurred from the foreclosure process. What type of lien may the lender levy against Chapo until the losses are paid?
Blanket lien
Who's the mortgagor in a mortgage?
Borrower
How does Farmer Mac support agricultural producers?
By creating a secondary market for agricultural loans, making it possible for agricultural lenders to fund more loans
Chuck needs to make a few repairs and upgrades to his home, but he needs some cash to do it. He decides to tap into the equity in his home, which he purchased using a VA home loan. What VA program can Chuck use to do this?
Cash-Out Refinance
Which of these items is a demand deposit?
Checking account
What type of lien is placed on a property as a result of a court order?
Equitable
The contract Jack is signing has a clause that protects his assets from a deficiency judgment in case of foreclosure. What is this called?
Exculpatory
Which of the following is NOT an accurate statement regarding the title?
Foreclosed properties rarely have clouded titles.
Stephanie was having trouble making her mortgage payments. Now her payments are lower than they were, and she's able to pay them each month. This is because her lender ______.
Gave her a loan modification
How might a borrower avoid paying the mortgage insurance premium required by an FHA loan?
Get conventional financing
Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance?
Her down payment of $50,000 isn't at least 20% of the purchase price.
Janice is selling her five-bedroom, three-bath home. She has a marketable title. What does that mean?
Her property's title is free and clear of liens and is only subject to loan payoff and any taxes owed.
Which of the following best describes the state of the market during the recovery phase of the real estate cycle?
High but stabilized unemployment and a high number of foreclosures
Lucas would like to be a homeowner, but his low credit score makes lenders unwilling to give him a mortgage. What makes the 203(b) loan a more likely option for Lucas to qualify for a mortgage?
It has less stringent qualifying requirements than a conventional loan.
What is the interest rate on a VA loan?
It varies by lender
Which of the following is a true statement about the Hardest Hit Fund?
It was available in the states with the most underwater homeowners.
Which professionals are most utilized by the buyer prior to closing?
Lenders, title companies, appraisers, and home inspectors
During which phase of the real estate cycle do residents engage with local amenities and services?
Living
What are advances?
Loans the Federal Home Loan Bank makes to member banks
Which of the following REITs focuses on lending money for mortgages and investing in mortgage-backed securities?
Mortgage REIT
Which organization manages and charters credit unions?
NCUA
Which of the following is a piece of specific data an appraiser may gather?
Property lot size
FHA-insured loan programs cover all of the following EXCEPT ______.
Recreational vehicles
Annual MIP can be removed from an FHA loan by ______.
Refinancing to a conventional loan. The annual MIP is paid for the life of the FHA loan and may only be removed by paying off the loan, by selling the home, or by refinancing to a conventional loan.
Violet purchased a house from Nick, and assumed the existing loan. Nick wants to make sure he isn't liable if Violet ever defaults. What can he do to remove his name from the loan agreement?
Request a novation
What kind of communities does Farmer Mac serve?
Rural communities
Which commitment section matches the schedule to its description and provides information related to the transaction, including legal description and parties?
Schedule A
When the Treasury collects fewer funds than what is needed to pay the government's bills, what action might it take?
Sell securities The Treasury may sell securities in the form of treasury bonds, bills, or notes as a way to raise additional funds to pay bills. The Treasury does not control interest rates.
After bonds are ______, their value goes up and down with the market.
Sold
What did the Troubled Asset Relief Program allow the U.S. Treasury to do in response to the 2007 financial crisis?
Spend billions
Which of the following would the FDIC most likely not insure?
Stock certificates
A developer, Howard, has purchased land with the expectation of constructing an apartment building. He explains to his lender that he'll need a construction loan as well, so the mortgage they sign includes what kind of clause to allow the construction loan's lien position to take priority?
Subordination
Rules and regulations that protect consumers of financial services are now the responsibility of ______, which was created by the Dodd-Frank Act.
The CFPB
Select the choice that best translates this clause into plain English. "Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing."
The borrower is allowed to prepay the loan without penalty.
Who must provide the buyer and seller with a copy of the closing disclosure?
The buyer's lender
What do property taxes in a mortgage payment pay for?
The cost of public services as a percentage of the property value
Maria is applying for a loan. Maria's employer has been asked to provide employment verification. Who else must complete parts of the request for proof of employment form?
The lender
What do sellers who agree to carry part of a loan for a buyer need to understand?
The risks involved
Kendra has applied for a mortgage from Best Bank. When is Best Bank required to provide Kendra with a Loan Estimate?
Three business days
How is title usually conveyed to the buyer during a foreclosure process?
Through a referee's deed
Which of the following is considered an ineligible property type for which a loan to purchase or refinance wouldn't be purchased by Fannie Mae?
Vacant lot
A Treasury note is a Treasury security ______.
With a maturity term between two and 10 years Treasury notes are issues in terms of two, three, five, seven and 10 years.
What is a lock-in clause?
a form of pre-payment penalty typically used only for high-yield loans
Kaycie is a new employee at a mutual savings bank. During orientation, she learned that mutual savings banks have limitations that are set by their ______.
Charter
Tyler is a developer who renovates a long-abandoned warehouse in a low-income neighborhood into a community center, complete with space for after-school programs, a daycare, and a gym. Tyler is able to complete the renovation with a loan funded by a local bank. Which act requires financial institutions to make credit available for this type of development?
Community Reinvestment Act
Victor is a buyer reviewing the Closing Disclosure he received from his lender. On the last page of the form, he sees a signature line. By signing the form, Victor has ______.
Confirmed receipt of the Closing Disclosure
A local company wants to build a new office building. What type of loan will it most likely be seeking from its commercial bank?
Construction loan
Which entity sets the requirements for qualified mortgages?
Consumer Financial Protection Bureau
Jackson has received several inquiries on his credit report. Which of these inquires was one he did NOT initiate?
Credit monitoring
Lenders are more comfortable when borrowers have around 20% of the property's purchase price to serve as what kind of payment?
Down payment
The Farm Credit System is overseen by the ______, an agency of the federal government.
Farm Credit Administration
Fannie Mae, Freddie Mac, and the Federal Home Loan Bank are regulated by the ______.
Federal Housing Finance Agency
Appraiser Jerry is looking past how a property is being used to determine a more optimal function. What is he determining?
Highest and best use
The ______ Act was legislation aimed primarily at addressing the effects of the subprime mortgage crisis.
Housing and Economic Recovery
What information is included on the Loan Estimate form so that the consumer can confirm the reputation of lending institution and individual?
Nationwide Mortgage Licensing System IDs
Special mortgage loan programs for ______ include the FHA248 and HUD 184 programs.
Native Americans living on tribal land
Your buyer, Chet, is a veteran trying to buy a house, but the certificate of reasonable value came in $10,000 lower than the agreed-upon sales price. What can Chet do?
Negotiate with the seller
Which of the following is NOT a benefit government-sponsored enterprises receive?
Non-profit status
What is the purpose of the loan transfer disclosure?
To notify the borrower that the loan is being resold on the secondary market, and how and where to make future payments
What is the purpose behind Appraiser Independence Requirements?
To protect appraisers' ability to assess an accurate value for a property by avoiding outside pressure or influence Appraiser Independence Requirements set certain criteria for lenders and real estate professionals in order to maintain appraiser independence and protect parties (homebuyers and investors) to the transaction.
Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?
To roll the cost of rehabilitating the purchased home into the mortgage The 203(k) loan is the same as the 203(b) loan, except that it includes funds to be used for rehabilitating the purchased home.
Monica is selling her house in Hawaii. Her appraiser, Tom, is using a less common title search method, only going back as far as when the last title search was performed. The method he's using assumes the last search was done accurately and legally, and that any issues were resolved. Which method is Tom using?
Torrens system
An industrial development bond is a variety of ______ bond.
Municipal An industrial development bond is a variety of municipal bond. They give private investors an opportunity to take advantage of tax-exempt funds in exchange for helping to fund municipal projects, such as apartment buildings.
Both the Housing and Economic Recovery Act and the American Recovery and Reinvestment Act funded a program called the ______ program, which provided emergency assistance grants to states to purchase and redevelop foreclosed and abandoned homes and residential properties.
Neighborhood Stabilization
Trixie purchased her one-bedroom beach cottage in 1992 with an FHA loan. Now she's selling it, and the buyer wants to assume her loan. The buyer intends to rent the cottage to vacationers. Will the FHA allow this buyer to assume Trixie's loan?
No, investors aren't allowed to assume FHA loans; the property must be owner-occupied
What percentage of closing costs can be included in a VA loan?
None; Closing costs may not be included in the loan, but the borrower may negotiate with the seller to pay these.
Lisa, a seller, is providing Darwin, a buyer, with a seller second on the purchase of her property. Darwin's conventional lender uses a note with deed of trust to secure the first loan. What instrument is Lisa most likely to use for her second loan with Darwin?
Note with deed of trust Lisa won't be able to use a contract for deed, and although the mortgage (with note) is an option, if Darwin's lender uses a deed of trust that means it is typical for the state, and would be Lisa's most likely choice.
Jacob is selling his unencumbered property to Shem and is acting as lender in the transaction. Which type(s) of finance instrument can Jacob use for the loan agreement?
Note with mortgage, note with deed of trust, or contract for deed
Iris is planning to purchase her first home. Based on what you know about the nature of real estate finance in our country, which approach is she most likely to use?
Obtaining a loan to purchase the home
When a buyer uses an FHA loan, the down payment amount is calculated ______.
On the lesser of the sales price or the appraised value of the property
Lenders who ______ can underwrite and approve FHA loans without requiring the FHA to review each borrower's qualifications
Participate in the direct endorsement program
A ______ is a mortgage-backed security issued by Freddie Mac.
Participation certificate
Which type of partnership may involve several mortgagors financing a multi-family dwelling?
Partnership among mortgagors
The two most common insolvency methods put in place when a bank fails are the purchase and assumption method and the ______ method.
Payout
Kara is a lender who is working with prospective buyer, Stan. What does Kara ask Sam to provide to show his work history and earning information?
Paystub
Leslie has applied for a loan modification. As part of the process, her lender will likely ______.
Perform a title search
Which clause is standard in a deed of trust and affects the foreclosure process that can be used if the borrower defaults?
Power of sale
Sally, Larry's appraiser, has provided her with a title commitment and indicated there's a problem with the title. Where can Larry find the requirements that must be met before a title insurance policy will be issued?
Schedule B-1
The Housing and Economic Recovery Act and the American Recovery and Reinvestment Act were enacted in response to ______.
The subprime mortgage crisis and economic meltdown of 2007-2008
What is the 95% rule as it relates to tax-deferred exchanges?
The total value of the property (or properties) being exchanged is at least 95% of the value of the property being sold.
What may happen to a transaction if a cloud on the title is discovered?
The transaction comes to a standstill until the cloud is cleared.
Which of the following is a likely result if Federal Home Loan Banks did not exist?
There'd be fewer funds available for lending in the community.
Which of the following acts created regulations for advertising credit services?
Truth in Lending Act
Which of the following best describes the state of the market during the recession phase of the real estate cycle?
Unemployment increasing, prices falling, and foreclosures on the rise
Store of value, medium of exchange, and what other factor define money?
Unit of value
